At Last, the Gold Correction

As readers know, I have been waiting for a correction in gold since May. Finally, here it is. You should be thinking of buying, dear reader, not selling. For those who missed the chance to load up in February at lower levels, as I recommended at the time, this is your chance to get aboard. Maybe not quite yet but it’s close. The 200 day moving average tends to mark the bottom in gold bull market corrections and that number is just under $1260.

There is no change in gold’s fundamentals. This is just the market getting tired and stale longs throwing in the towel, in my opinion. The higher dollar is also a short term factor, largely due to a collapse in the yen.

What will bring back an upward bias back to the gold market? This Friday’s jobs number could do the trick. The markets may need another reminder of just how weak the U.S. economy is and how impossible it is for the Fed to normalize monetary policy. We could easily get that indication at the end of the week.

For those of you who actually care about the economy, here is the news we got this morning. For the second month in a row, the September ISM survey of New York Purchasing Managers reported a contraction in the headline number, printing 49.6 (below 50). That is a slight improvement from August’s 47.5, but the survey’s Employment index crashed from 54.9 to 33.9, its biggest one month drop ever, taking it back to its June 2009 low.

The chart is adjusted for expansion/contraction at the 0-x-axis representing 50.

That’s just a sample of the economic data we have been getting lately. I don’t think it supports a risk-on environment and a weaker gold price.

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Who is Wayne Wile?

Wayne Wile is an international investment advisor with more than five decades of experience in wealth management. He has spent the majority of his career working with institutional and high net worth investors, seeking to mitigate risk while optimizing portfolio performance.

Wayne began work in the mailroom of a brokerage firm when he was 17 years of age and rose to a senior executive position. He was recruited for key jobs with several nationally recognized investment firms in Canada before striking out on his own.

Wayne’s methods as a trader are governed by simplicity and self-discipline. He says that losses are the children of greed and fear while profits are the spawn of patience and trend-following. “Time is always on your side. Let the market tell you what it wants to do and keep it company. Never chase an idea you think you have missed. There is always another one coming along.”

Wayne is especially opposed to sophisticated trading strategies that try to predict the future based on mathematical analysis of historical data. “These systems routinely destroy far more wealth than they create,” he says. “Only a highly intelligent, well-educated individual would be foolish enough to do this stuff. Successful traders need to stop analyzing and learn to listen to what the market is telling them every day.”

Wayne resides in the Cayman Islands but considers himself a citizen of the world.